Thailand: Completing the infrastructure mission

The Thai government has committed itself to develop the country’s infrastructure with new road and rail networks and the expansion of air and seaports. The Ministry of Transport is working on tenders for interested companies and those who want to invest.

Air Chief Marshal Sukumpol Suwanatat, Minister of Transport, spoke to Investvine’s Arno Maierbrugger, about his plans for the country.

(Note: Sukumpol took over the Ministry of Defense after a cabinet reshuffle in January 2012)

Thailand is currently looking to improve its transport infrastructure network to better connect the country to neighboring economies and to China. After the devastating floods in 2011, the government is also providing 130 billion baht ($4.3 billion) to rebuild destroyed roads, railways and industrial estates. Investors are welcome to participate in tenders for major projects, says Thailand’s Minister of Transport, Sukumpol Suwanatat.

What are, at present, the major challenges of infrastructure planning in Thailand?

Right now, the challenge is that the government has committed itself before the elections to heavily expand the infrastructure. Now we have to complete our mission. For example, we have to decide on contracts for ten new lines of the MRT subway and the BTS Sky Train in Bangkok to be finished within four years, and as well the new high-speed train from Bangkok to the northeastern part of Thailand. We are also about to decide on the second phase of Suvarnabhumi Airport, an expansion that is supposed to handle the growing number of passengers, which is expected to rise from 45 million to 65 million a year.

What are the ministry’s plans to improve the rural infrastructure?

We are planning to expand the east-west corridor and the south-west corridor, and we will also expand the provincial airports.

How much budget has been allocated for all these projects?

Within four years, more than a trillion baht ($33 billion) will be spent, including the MRT, BTS, the high-speed train and the Suvarnabhumi Airport expansion.

The railway network in Thailand is run by the state. Projects such as the high-speed train, would they be state-run as well or would you like to have it managed by a private company?

Yes, maybe in form of a joint-venture of a foreign company with a local group. Regarding the railways, for example, we intend to use the standard track gauge, not the meter gauge we use today, to get the railways connected to the standard-gauge tracks of the neighboring countries. This could be interesting for private investors.

As we are promoting investors from the GCC, would you approach these people and see if they are interested in your projects?

Yes, not only from the GCC, but investors from all over the world. In the GCC, however, there are certainly big funds for investments available.

There was one report in the news lately that the UAE is considering to co-invest in a land bridge linking the Andaman Sea with the Gulf of Thailand. Is this realistic?

Yes, this is part of the Southern Seaboard development plan. You know, ships from the Middle East currently go straight over the ocean to the Pak Bara pier in Thailand. With the land bridge, it would only take 30 hours by train from the pier up to China. Now, it takes five days to ship from there to China through the Malakka Strait, and it is not safe. However, the land bridge is not the first priority, we need to expand Pak Bara pier on the Andaman side. This project is attractive for investors, because we have agreements with China and Laos to build a railway from Kunming in southern China through Laos and then to Thailand. It can be profitable for investors, if the government decides to establish joint-ventures with foreign companies.

Are there any special incentives for big investment projects into infrastructure?

The most important factor is that we need the funding to start the projects, and for such investments we are granting incentives. The operation we can handle by ourselves. Later, there will be a profit returned, depending on the agreements.

Speaking of that, could you strike a balance on the Bangkok public transport projects in terms of amortization and efficiency?

Currently, we have three lines operated by three different concessionaires. First is the Sky Train by the Bangkok Mass Transit System Public Company, the second one, the MRT subway, is privately managed [by the Bangkok Metro Company Limited], and the third one, the Airport Rail Link, is run by the government. Within four years, another ten lines will be connected. So far, investors have been satisfied.

But there are undoubtedly some issues with the Airport Rail Link. What can be done to improve the service and make it profitable?

We have plans to expand it to connect the Don Muang airport with the Airport Rail Link. The key reason why people currently don’t use it that much is because the line is too short. That’s why we need to expand the line to the other airport and rural areas. And we also came down with the ticket price to encourage people to use the system.

Pollution from individual traffic is a major issue in Thailand’s cities. How does your ministry address these problems? What is the roadmap for environmental action in this respect?

The key roadmap regarding the pollution is to build the other ten lines of the Sky Train and the subway, and in ten years we believe that the transportation habits will have changed. People in Bangkok will not drive that much with their cars, and they will use less gasoline, but more natural gas. We also have the plan to issue one single ticket that can be used on all public transport system in Bangkok such as the Sky Train, the MRT and also public buses and boats. This will come into effect when the ten new lines are finished, in four years from now.

How far are the plans to launch new discount airlines operating in Thailand, one as a direct offspring of Thai Airways and one in a joint venture with Singapore’s Tiger Airways? Altogether there would be five discount carriers serving Bangkok next year, does this make economic sense for the sector?

Actually we are issuing only one new license in the moment, for Thai Smile [sub-brand of Thai Airways]. Tiger Airways is not decided yet.

But still you will have four discount carriers, Thai Smile, Thai Air Asia, Nok Air, and Orient Thai Airlines.

That is not too much, because Nok Air and Thai Smile are only serving domestic routes. Orient Air is a small company, with only six aircraft, also for domestic destinations only.

What are the investment opportunities after the flooding?

We have plans to rebuild the infrastructure within six months and protect Bangkok and all parts of Thailand. There has a budget of about 130 billion baht been announced for these measures in the six-month period. We are looking for foreign investors for technology input. We will invite companies from all over the world to take part in reconstruction. We are just starting to outline and design the projects, and if there are projects that we can do by ourselves we will handle it, and for the others there will be a tender for interested parties.

The Thai government has committed itself to develop the country’s infrastructure with new road and rail networks and the expansion of air and seaports. The Ministry of Transport is working on tenders for interested companies and those who want to invest.

Air Chief Marshal Sukumpol Suwanatat, Minister of Transport, spoke to Investvine’s Arno Maierbrugger, about his plans for the country.

(Note: Sukumpol took over the Ministry of Defense after a cabinet reshuffle in January 2012)

Thailand is currently looking to improve its transport infrastructure network to better connect the country to neighboring economies and to China. After the devastating floods in 2011, the government is also providing 130 billion baht ($4.3 billion) to rebuild destroyed roads, railways and industrial estates. Investors are welcome to participate in tenders for major projects, says Thailand’s Minister of Transport, Sukumpol Suwanatat.

What are, at present, the major challenges of infrastructure planning in Thailand?

Right now, the challenge is that the government has committed itself before the elections to heavily expand the infrastructure. Now we have to complete our mission. For example, we have to decide on contracts for ten new lines of the MRT subway and the BTS Sky Train in Bangkok to be finished within four years, and as well the new high-speed train from Bangkok to the northeastern part of Thailand. We are also about to decide on the second phase of Suvarnabhumi Airport, an expansion that is supposed to handle the growing number of passengers, which is expected to rise from 45 million to 65 million a year.

What are the ministry’s plans to improve the rural infrastructure?

We are planning to expand the east-west corridor and the south-west corridor, and we will also expand the provincial airports.

How much budget has been allocated for all these projects?

Within four years, more than a trillion baht ($33 billion) will be spent, including the MRT, BTS, the high-speed train and the Suvarnabhumi Airport expansion.

The railway network in Thailand is run by the state. Projects such as the high-speed train, would they be state-run as well or would you like to have it managed by a private company?

Yes, maybe in form of a joint-venture of a foreign company with a local group. Regarding the railways, for example, we intend to use the standard track gauge, not the meter gauge we use today, to get the railways connected to the standard-gauge tracks of the neighboring countries. This could be interesting for private investors.

As we are promoting investors from the GCC, would you approach these people and see if they are interested in your projects?

Yes, not only from the GCC, but investors from all over the world. In the GCC, however, there are certainly big funds for investments available.

There was one report in the news lately that the UAE is considering to co-invest in a land bridge linking the Andaman Sea with the Gulf of Thailand. Is this realistic?

Yes, this is part of the Southern Seaboard development plan. You know, ships from the Middle East currently go straight over the ocean to the Pak Bara pier in Thailand. With the land bridge, it would only take 30 hours by train from the pier up to China. Now, it takes five days to ship from there to China through the Malakka Strait, and it is not safe. However, the land bridge is not the first priority, we need to expand Pak Bara pier on the Andaman side. This project is attractive for investors, because we have agreements with China and Laos to build a railway from Kunming in southern China through Laos and then to Thailand. It can be profitable for investors, if the government decides to establish joint-ventures with foreign companies.

Are there any special incentives for big investment projects into infrastructure?

The most important factor is that we need the funding to start the projects, and for such investments we are granting incentives. The operation we can handle by ourselves. Later, there will be a profit returned, depending on the agreements.

Speaking of that, could you strike a balance on the Bangkok public transport projects in terms of amortization and efficiency?

Currently, we have three lines operated by three different concessionaires. First is the Sky Train by the Bangkok Mass Transit System Public Company, the second one, the MRT subway, is privately managed [by the Bangkok Metro Company Limited], and the third one, the Airport Rail Link, is run by the government. Within four years, another ten lines will be connected. So far, investors have been satisfied.

But there are undoubtedly some issues with the Airport Rail Link. What can be done to improve the service and make it profitable?

We have plans to expand it to connect the Don Muang airport with the Airport Rail Link. The key reason why people currently don’t use it that much is because the line is too short. That’s why we need to expand the line to the other airport and rural areas. And we also came down with the ticket price to encourage people to use the system.

Pollution from individual traffic is a major issue in Thailand’s cities. How does your ministry address these problems? What is the roadmap for environmental action in this respect?

The key roadmap regarding the pollution is to build the other ten lines of the Sky Train and the subway, and in ten years we believe that the transportation habits will have changed. People in Bangkok will not drive that much with their cars, and they will use less gasoline, but more natural gas. We also have the plan to issue one single ticket that can be used on all public transport system in Bangkok such as the Sky Train, the MRT and also public buses and boats. This will come into effect when the ten new lines are finished, in four years from now.

How far are the plans to launch new discount airlines operating in Thailand, one as a direct offspring of Thai Airways and one in a joint venture with Singapore’s Tiger Airways? Altogether there would be five discount carriers serving Bangkok next year, does this make economic sense for the sector?

Actually we are issuing only one new license in the moment, for Thai Smile [sub-brand of Thai Airways]. Tiger Airways is not decided yet.

But still you will have four discount carriers, Thai Smile, Thai Air Asia, Nok Air, and Orient Thai Airlines.

That is not too much, because Nok Air and Thai Smile are only serving domestic routes. Orient Air is a small company, with only six aircraft, also for domestic destinations only.

What are the investment opportunities after the flooding?

We have plans to rebuild the infrastructure within six months and protect Bangkok and all parts of Thailand. There has a budget of about 130 billion baht been announced for these measures in the six-month period. We are looking for foreign investors for technology input. We will invite companies from all over the world to take part in reconstruction. We are just starting to outline and design the projects, and if there are projects that we can do by ourselves we will handle it, and for the others there will be a tender for interested parties.